Acacia Q3 2014 Preview

Acacia Research Group (ACTG) Q3 2014 in Review

Disclaimer:  I have not been compensated to publish this preview by any company discussed. All information is based on publicly available information and all opinions/conclusions are my own. This preview is only for informational purposes. Please contact a registered financial agent before making any financial decisions.

Link to PDF version on Scribd.com  for better formatting.

Commentary:

Acacia continued to be very active in Q3 2014, although I am of the opinion that it will be a “bridge” quarter moving into Q4 2014 and 1H 2015 where activity is sure to accelerate with a numerous amount of trial dates and Markman hearings.  My opinion is the quarter will not be a blowout as it was in Q2 2014.  There were a number of dismissals in Q3 although estimating revenue from these agreements continues to be very difficult.  My gun to the head guess would be in the $25-$30M range.  Key highlights:

-       RPX and Innovative Display agreement has led to a number of dismissals on the docket, which included Apple, Acer, Canon, Verizon, T-Mobile, Nikon, and Best Buy.  A Markman opinion was also issued.

-       Blackberry and Microsoft were also able to reach agreements through mediation with Innovative Display.

-       Sharp licensed with Acacia under three portfolios, which included Adaptix.

-       Arthrex licensed with Bonutti Skeletal.

-       Progressive Semiconductor licensed with Marvell and later was issued a Markman opinion in their case against Qualcomm.

-       Markman opinion issued in LifeScreen v Cordis on August 12, 2014.

-       Signal Enhancement had their case stayed with Broadcomm pending the outcome of the Inter Partes Review that was filed.  The case was settled per the PTAB docket.  It is not known if there was any revenue attached with the settlement.

-       There were a number of Inter Partes Reviews filed across a handful of portfolios in the quarter.  There were no final decisions that I was able to locate on the database.

-       Adaptix Markman opinion was issued in case with Huawei and ZTE.

-       Light Transformation Technologies Markman opinion issued on the ‘959 patent ruling all asserted claims invalid.

-       Markman hearing scheduled for 9/29/2014 was taken off the calendar because of settlement agreements in the Online News Link portfolio.

List of Q3 case dismissals, * = my estimate of a likely larger than average agreement:

Adaptix – Sharp 8/20/2014 *

Auto-Dimensions – Autodesk 8/21/2014

Battle Toys – Lego 9/2/2014 – 8K

Bonutti Skeletal Innovations – Arthrex 7/8/2014 *

Brandywine Communications – Consolidated Communications Holdings

Cell & Network Selection – Sharp 8/20/2014 * , AT&T * to be completed within 30 days of 9/9/2014

Cellular Communications Equipment – Sharp 8/20/2014 *

Computer Software Protection – Mathworks 7/1/2014

Delaware Display Group – Amazon 9/5/2014 *

Gametek – Rockyou 9/3/2014

Innovative Display – MiTac Digital 7/9/2014, Acer 8/22/2014, Apple 8/26/2014, Canon 8/6/2014, Verizon 9/3/2014, T-Mobile 9/3/2014, Best Buy 9/9/2014, Blackberry 9/16/2014, Microsoft 9/16/2014, Nikon 9/27/2014.  Many of these dismissals/settlements should be covered by the RPX agreement dated 8/19/2014 *.

Labryinth Optical – Fujitsu Network Communications 9/11/2014

Online News Link – BodyBuilding.com 8/4/2014, Strongview Systems 9/11/2014, Overstock.com 9/24/2014, Netflix 9/24/2014, Groupon 9/26/2014, QVC 9/26/2014, Backcountry.com 9/26/2014, Evite Inc 9/26/2014, Provide Commerce 9/26/2014

O.S. Security – Kaba llco Corp 9/5/2014 ,  Alarm Lock Systems 9/24/2014

Promethean Insulation Tech – Pregis Corp 7/24/2014, Innovative Energy 7/24/2014, Energie Innovation 7/24/2014, Saving Haven LLC D/B/A Radiantguard 9/16/2014

Progressive Semiconductor Solutions – Marvell 8/15/2014 *

Saint Lawrence – Tecnotree OYJ 7/22/2014

Signal Enhancement – Broadcomm 7/25/2014

Super Resolution Technologies – Nikon Corp 7/24/2014 Stayed pending Settlement – 9/23/2014 Agreement announced *

Video Streaming Solutions – Microsoft 7/1/2014

Wireless Mobile Devices – Sprint 7/11/2014 * , AT&T 7/17/2014 * (Only a docket entry, no filing for AT&T

Q3 2014 Partnerships and New Litigation Filed

Renesas Electronics 7/3/2014

A new subsidiary named In-Depth Test LLC, filed suit against five targets during the quarter. The patents cover semiconductor testing and were acquired / partnered with a company called Test Advantage Inc, located in Tempe Arizona.

Intersil Corp
Maxim Integrated Products
Vishay Intertechnology

Linear Technology Corp

Fairchild Semiconductor Corp

A new subsidiary named Nexus Display Technologies filed suit on July 11th, 2014 against nine targets. The patents originated from Silicon Image Inc.

Dell
Lenovo
Panasonic
Eizo
NEC
Sony
Viewsonic
BenQ
LG

Credit Card Fraud Control Corporation filed two suits on July 21, 2014 and three more suits on September 10, 2014:

Chase Paymentech Solutions

First Data Corporation

Elavon Inc

TCSP Inc

MaxMind Inc

CeraMedic LLC filed suit against three companies between July 23rd and August 1st. The patents originated from Fraunhofer-Gesellschaft in the late 90s and were transferred to Acacia in February 2014. The patents relate to ceramics used in hip replacements.

Smith & Nephew

DuPuy Orthopaedics

CeramTec GMBH

Data Engine Technologies filed suit against Google on September 2^, 2014.

Liefeport Sciences filed suit against C.R. Bard on September 3, 2014.

Industrial Print Technologies filed suit against two companies on September 12, 2014:

Hewlett-Packard

O’Neil Data Systems

Cellular Communications Equipment filed suit against six targets on September 15, 2014:

Samsung

AT&T

Boost Mobile

Sprint

T-Mobile

Verizon

Parthenon Unified Memory Architecture filed suit against Samsung on September 22, 2014. The patents originated from ST Microelectronics. Acacia announced a partnership with an unnamed leading semiconductor on April 15th, 2014.

 

Markman Opinions issued in Q3 2014:

Innovative Display v Acer issued 8/26/2014

Patents 6,755,547, 7,300,194, 7,384,177, 7,404,660, 7,434,974, 7,537,370, and 8,215,816 asserted with 12 claim terms in dispute. 

Summary of Results

Progressive Semiconductor v Qualcomm issued 9/4/2014

Patents 6,473,349 and 6,862,208 asserted with 5 claim terms in dispute.

Summary of Results

Adaptix v Huawei & ZTE

Patents 6,947,748 and 7,454,212 asserted with 5 claim terms in dispute. The opinion was issued on September 19, 2014.

Summary of Results

Light Transformation Technologies v GE et al

Patent 8,220,959 asserted with 11 claim terms in dispute. The opinion was issued on July 11, 2014.

Result - The Court construed the claim term “axis of light direction” as indefinite and thereby found all asserted claims of the ‘959 patent to be invalid.

LifeScreen Sciences v Cordis

Patents 5,709,704 and 6,214,025 asserted with 9 claim terms in dispute.  The opinion was issued on August 12, 2014.

Summary of Results

Q4 2014 Events:

Endotach v Cook was scheduled for trial on December 3, 2014.  It has been moved to March 30, 2015.

Markman Opinion should be issued in Body Science v A&D Engineering, Lifewatch Services, and Polar Electro.  Hearing was held on July 31, 2014.

Cellular Communications Equipment Markman hearing remains on schedule for November 18, 2014 in EDTX.

Optimum Content Protection v Microsoft Markman hearing is set for November 6, 2014 in EDTX.

Cell & Network Selection v Blackberry, Nokia, Sprint, T-Mobile, and Verizon Markman hearing is set for November 13, 2014 in EDTX.

Questions for the Q3 Conference Call:

-       Impact on monetization from the Innovative Display Markman opinion, which claim 1 of the ‘547 patent was ruled indefinite?

-       Plans to appeal the claims construction order in Light Transformation Technologies?

-       Were there any final decisions at the PTAB with Inter Partes Reviews that have reached final decisions or were not instituted in the quarter?

-       Any color on the pipeline and when to expect additional intake?

-       Results from the litigation with Adaptix in Japan?

10/09/2014 Market Wrap

News:
DSS announced a Markman hearing will be held in their
case against Taiwan Semi on March 2, 2015.
Filings:
Nothing to Report
Trading Commentary:
The sector again traded deep read with the overall markets,
down over 3%.
There was no real news in any individual names that I am
aware of.
ACTG firmed up after trading down sharply this morning,
closing down 1.77%.
CRDS was relatively stable all morning and didn't start selling
off until after 1pm EST.  Shares closed down 7%.
FNJN continues to make new 52 week lows on increased
volume.  Shares closed down 9.8% to $2.30.
ITUS shares continue to be very weak after the Markman
opinion issued last week.  Shares closed down 18%.
MARA was pretty resilient on increased volume after being
down sharply under $13 briefly.  Shares rallied in the
afternoon closing at $13.85, down 2.9%.
OTIV was again weak after its big move higher last month.
Shares closed down 8% to $2.05.
PRKR closed at the low of the day and at its 52 week low of
$1.07, down 4.4%.
STRP was one of the only names green for the day up .92%,
closing at $15.43. The stock has been on a very good run
over the last month or so.
VRNG continues to trade down with its en banc
petition needing to be filed next week. Shares closed down
7.9% to $.75.
WDDD was another name that closed green, up 5.8% to $.18.
Ticker	$CHG	%CHG	Volume	Closing
				Price
ACTG	$      (0.26)	-1.77%	462,100	$14.44
BCYP.OB	$  (0.0059)	-6.95%	157,400	$0.0790
CLGL (MVPI)	$  (0.0800)	-10.43%	6,000	$0.72
COPY (ITUS)	$  (0.0344)	-18.11%	162,100	$0.156
CRDS	$      (0.20)	-7.37%	46,700	$2.57
DSS	$  (0.0200)	-2.86%	302,800	$0.6800
EDIG.OB	$  (0.0060)	-13.04%	89,200	$0.0400
ENIP	unch	unch	65,100	$0.0200
INVT (EONC)	$      (0.05)	-3.68%	59,500	$1.31
FNJN	$      (0.25)	-9.80%	30,500	$2.30
IDCC	$      (1.14)	-2.79%	432,900	$39.71
MARA	$      (0.42)	-2.94%	80,200	$13.85
MGT	$    (0.080)	-9.41%	49,400	$0.77
NTIP	$      (0.05)	-2.27%	15,100	$2.15
OTIV	$      (0.18)	-8.07%	514,900	$2.05
PCO	$      (0.05)	-3.47%	1,657,100	$1.39
PPRO	$      (0.03)	-1.16%	1,000	$2.55
PRKR	$      (0.05)	-4.47%	280,700	$1.07
PTNT	$         0.05	1.67%	2,300	$3.05
RMBS	$      (0.53)	-4.50%	765,500	$11.28
SITO.OB	$  (0.0400)	-10.53%	184,100	$0.34
SPEX	$  (0.0600)	-5.56%	925,700	$1.0200
STRP	$         0.14	0.92%	104,300	$15.43
TIVO	$      (0.71)	-5.52%	2,949,800	$12.17
TSRA	$      (1.29)	-4.78%	426,200	$25.77
UPIP	$      (0.04)	-2.36%	224,900	$1.66
VHC	$      (0.16)	-3.49%	570,400	$4.43
VRNG	$  (0.0647)	-7.94%	1,179,500	$0.7503
WDDD.OB	$    0.0100	5.88%	147,100	$0.1800
WILN	$      (0.05)	-1.59%	84,200	$3.09

10/08/2014 Market Wrap

News:
PCO introduced a new messaging app called Yovo.
UPIP announced changes to their board of directors.
WILN announced they have entered into an agreement
with RPX.
Filings:
Nothing to Report
Trading Commentary:
Ticker	$CHG	%CHG	Volume	Closing
				Price
ACTG	$         0.39	2.73%	375,600	$14.70
BCYP.OB	$  (0.0051)	-5.67%	181,600	$0.0849
CLGL (MVPI)	$  (0.3000)	-27.27%	21,100	$0.80
COPY (ITUS)	unch	unch	165,800	$0.190
CRDS	$         0.01	0.37%	46,200	$2.77
DSS	$  (0.0500)	-6.52%	372,700	$0.7000
EDIG.OB	$    0.0004	0.88%	38,800	$0.0460
ENIP	$    0.0010	5.26%	71,500	$0.0200
INVT (EONC)	$      (0.07)	-4.90%	267,500	$1.36
FNJN	$      (0.25)	-8.86%	29,700	$2.55
IDCC	$         2.01	5.18%	454,100	$40.85
MARA	unch	unch	14,400	$14.27
MGT	unch	unch	69,600	$0.85
NTIP	unch	unch	600	$2.20
OTIV	$         0.07	3.24%	399,700	$2.23
PCO	$         0.18	14.29%	498,500	$1.44
PPRO	unch	unch	N/A	$2.58
PRKR	$         0.01	0.90%	392,400	$1.12
PTNT	unch	unch	N/A	$3.00
RMBS	$         0.15	1.29%	547,100	$11.81
SITO.OB	$    0.0300	8.57%	29,000	$0.38
SPEX	$    0.0100	0.95%	774,700	$1.0600
STRP	$      (0.35)	-2.24%	148,000	$15.29
TIVO	$         0.30	2.38%	2,161,600	$12.88
TSRA	$         0.95	3.64%	582,800	$27.06
UPIP	$      (0.01)	-0.58%	293,200	$1.70
VHC	$      (0.25)	-5.17%	1,284,200	$4.59
VRNG	$  (0.0049)	-0.60%	1,107,800	$0.8150
WDDD.OB	$  (0.0250)	-12.82%	96,700	$0.1700
WILN	unch	unch	57,200	$3.14